The Collected Works of Author and Blogger Larry Roberts

Archive for April, 2013

I recently opined that Now is the time to reform the home mortgage interest deduction. The need to reform this deduction is clear; it does nothing to boost the home ownership rate, it costs the government $70 billion a year, and it merely inflates home prices for high wage earners who count on the deduction when they consider taking on debt to purchase a house. In an era of sky-high federal budget deficits, the myriad of tax breaks given to special interests are on the chopping block. If you agree there is a need to reform the home mortgage interest deduction, the question becomes "what is the best way to reform it?" Politicians are considering a variety of proposals and…[READ MORE]

House prices are rising rapidly in Orange County and most of Coastal California. There are anecdotal reports of bidding wars, and many properties are selling for 5% to 10% above recent comparable sales. As I've documented, Orange County home resale volume is very weak by historic norms, and the only increase in housing demand is coming from investors, so the competition for housing is not coming from resurgent owner-occupant demand. So why are we having bidding wars? If any of you are old enough to remember the OPEC oil embargo of the 1970s, you've seen first hand what happens when normal demand faces a dramatic decline in supply. Gasoline supplies dried up, and motorists were forced to wait in long lines…[READ MORE]

When most people think about a bull market in any asset class, it begins with an increase in demand for the product. In housing, this demand has historically been from owner occupants taking jobs and competing for the available housing stock with their new income. All sustainable housing market rallies in the past have been built on strong job growth and increasing wages. Not so with our current housing recovery. This has many questioning whether or not this recovery is real. The engineers of this house price rally at the federal reserve hope to drive up prices to create momentum which will stimulate the economy and cause the job growth and increasing wages needed to keep the momentum going. Only…[READ MORE]

Ben Bernanke, chairman of the federal reserve, has pledged to keep interest rates low through 2015 to instill investor confidence. However, there is dissention at the federal reserve, and Bernanke will likely not be reappointed in 2014 at the end of his term, so federal reserve policy could change. Further, the federal reserve does not have absolute control over interest rates, and if investors want to exit government bonds in mass, interest rates may rise (bond prices fall) even with the federal reserve buying all the bonds it can. But how likely is that scenario? Bernanke would like you to think the probability is zero, but is it? Let's take a look back in history when conditions were similar to…[READ MORE]

"Those who cannot learn from history are doomed to repeat it." George Santayana "What experience and history teach is this - that people and governments never have learned anything from history, or acted on principles deduced from it." G. W. F. Hegel The causes of the housing bubble are myriad and complex. Learning the lessons of history from the housing bubble is made more difficult by distortions of fact by political partisans seeking to further their self-serving agendas. The political right incorrectly blames the GSEs for inflating the housing bubble because they want to see those entities eliminated. The political left wants to blame the banks for everything so they can feel justified giving free money to loanowners to buy…[READ MORE]

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